Only 30 per cent of high earners are expected to have a comfortable retirement compared to 13 per cent of households overall, according to the most recent HL Savings and Resilience Barometer estimates.
Meanwhile, only 39 per cent of households overall are on track to achieve a moderate retirement income compared to 69 per cent of higher-income households. In comparison to their working years, this means that many higher-income households could need to cut back on their expenses in retirement.
The Pension Life Standards Association (PLSA) established a moderate standard of living at £23,300 per year for an individual and £34,000 for a couple; a comfortable retirement is set at £37,300 per year for an individual and £54,500 for a couple. These standards form the basis for the ranges for moderate and comfortable retirement incomes.
Hargreaves Lansdown head of retirement analysis Helen Morrissey says: “There’s a shock in store for higher earners with the latest data from the HL Savings and Resilience Barometer showing only 30 per cent of households are on track for a comfortable retirement income. If you’ve been used to having plenty of money during your working life, then you could face a nasty surprise if you enter retirement and find your pension cannot sustain the lifestyle you’ve become accustomed to.
“The problem is compounded when we look at the percentage of high-earning households on track for moderate retirement income. Just under seven in ten are on track for this which may seem high, but the likelihood is that a moderate income will nowhere near meet their needs.
“The PLSA’s moderate retirement income is pegged at £23,300 per year for a single person and £34,000 for a couple. If you’ve been used to lavish holidays a couple of times a year, then the two weeks in Europe afforded under this standard just isn’t going to cut it and you are going to need to make some difficult decisions on your spending.
“This version of the barometer has shown the financial resilience gap between higher and lower earners continuing to widen. Higher earners have seen their overall resilience improve in stark contrast to lower-paid households. If these households are in a position where they can save more, then boosting contributions into a pension should be an important consideration.
“Keeping track of how your pension planning is progressing is really important. You need to think about what you want from retirement and put a plan in place to help you get there. There are lots of calculators online that can help you model how much you are on track to get, and if you are falling behind you have the time to make up the gap by contributing more. If you do find you are running behind what you were hoping for then it is important not to despair – it’s never too late to make a difference.”
